Maybe we need a “Ya Think?” of the day, going to the article that shows the best grasp of the obvious. If so, the article with the headline In Greece, fears that austerity is killing the economy would win:
Deeply indebted and nearly bankrupt, this Mediterranean nation was forced to adopt tough austerity measures to slash its deficit and secure an international bailout. But as Greece’s economy slides into free fall, critics are scanning the devastated landscape here and asking a probing question: Does austerity really work?
Unemployment has surged to 18.8 percent from 13.3 percent only a year ago. Overburdened public hospitals are facing acute shortages of everything from syringes to bandages because of budget cuts, with hiring freezes forcing the mothballing of operating rooms even as more unemployed are relying on the public health system. Rates of homelessness, suicide, crime and HIV cases from intravenous drug use are jumping.
Greece has been forced to cut spending and raise taxes in the middle of a severe downturn, slashing pensions as well as state salaries, jobs and services. As public confidence has evaporated, consumer spending — the biggest driver of the economy — has plunged, generating cascading losses at private firms. The result is a dizzying economic plummet and social crisis that is bringing the cradle of Western civilization to its knees.
Those paragraphs could have been written by any economist with a rudimentary textbook sitting in an office, without any real-world knowledge about Greece. It’s as simple as knowing supply and demand. When you already have a situation of low demand, and your government does everything possible to lower it more, you make the situation worse. The only element this story doesn’t include is the fact that the budget deficit, the entire reason for the austerity, increases, amid collapsing revenue. That’s especially true in Greece, which raised taxes without any way to enforce payment of them. Greece never had a spending problem as much as it had a tax collection problem. Then they exacerbated it.
It’s telling that the proponents of austerity have no economic basis for why Greece should destroy their society. Instead they talk the language of morality plays. Greece lied about their deficit (this was two governments ago, but whatever), and they must suffer for their lies so they never forget what they’ve done. Really, that’s the actual rationale:
European powers, led by fiscally conservative Germany, have been insisting that Greece correct years of mismanagement by enacting swift waves of cuts and other major economic reforms to regain the confidence of investors and ensure the integrity of the euro. Slashing the deficit quickly is essential to ushering in a sustainable future, they have argued, and the resulting social pain is necessary to impress on Greek politicians and society that such excesses should never happen again.
As if the public employees and ordinary workers, the ones who really suffer, had anything to do with the disclosure of Greek fiscal policy.
And in fact, by forcing this level of austerity on Greece and its other trading partners, Germany is actually killing their own economy. They were able to avoid this for a while by shifting their exports to Asia and South America, but if every country around you stagnates, you’re bound to catch that cold.
Germany’s economy contracted slightly in the fourth quarter, putting Europe’s powerhouse on the verge of a mild recession and raising questions about how much longer Berlin will continue to shoulder the burden of rescuing fiscally wayward euro-zone members.
Germany’s statistics office said GDP slid around 0.25% in the fourth quarter from the third, ending a two-year expansion.
When we look back at this in 30 years, we will identify Europe in 2009-2012 as making some of the most catastrophic economic errors in world history.



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At what point, under what scenario will “investors” in Greek debt begin to have confidence? I will always take a 50% “haircut” over a 100% loss as an investor. Every investor should lose everything and Greece should start over like Iceland. If that means an end to the Eurozone that’s not their problem.
A 50% “haircut” vs. a 100% loss may look good by comparison, but I’d never put another penny in that “investment”, no matter the promised rate of return.
Economic Disparity Tour hits Portland:
http://freewayblogger.blogspot.com/2012/01/portland-or-day-2.html
Seattle’s next.
The problems imposed on Greece are due to European dumbfucks basing economic policy on ideological mumbo-jumbo instead of proven economic realities. This is not a fact-based course of action, it is structured to take care of the oligarchs at the expense of the middle-class.
I had to do a double take on the articles about the German economic situation after all the prior good news stuff about them.
Not only will people look back at the insanity of those austerity steps in European countries, it will totally wig out over the US policies!
Shorter Germany: “Greece, we feel your pain…Not!”
TWOOPH!
Rothchild is still alive and well. Watch over your Roth IRA’s like a bulldog!
I don’t see how Greece can stay on the euro at this point. What a disaster.
I don’t see how they can either. However, I’m not a member of the IMF, nor an Economist.
I agree for the most part of what this article says other than that Greece was forced…Greece was not forced to take the course of action taken, but instead Greek politicians voluntarilly took this course of action of austerity/bailout. There was a big deal how the Greek PM was going to put it up for public vote, but then he backed down from that. There’s nothing that stops any euro country from saying they’re returning to their old currency and saying how/if they’ll pay off their debts. Saying that Greece had no choice only empowers there to be more austerity in other countries by giving politicians cover for their voluntary choices.
The truth is that you can rip the band-aid off quickly like in Iceland, (which is recovering nicely,) or pull it off slowly like Japan and the US. Keeping a dysfunctional country like Greece afloat will only drag down everyone else.
There is no good solution to bad governance and political profligacy. The math of Government promising more than it can deliver is inexorable.
Say that again, then tell me that cuts, austerity, bailouts, or anything of the fucking sort besides DIRECT STIMULUS OF THE MIDDLE AND LOWER CLASSES can save an economy. I fucking dare you.
That is VERY WELL put!!!
You runnin’ for anything this cycle?
What is Greece?
The government or the people?
I’m not sure they can stay on the planet.
If you reread…
I read that as Greece was forced to adopt tough austerity measures to slash its deficit in order to secure an international bailout. Or in simpler terms, if they wanted a bailout, they had to do it.
How the bailout money is being spent:
http://globaleconomicanalysis.blogspot.com/2012/01/greek-crisis-has-pharmacists-pleading.html
“Does austerity work?”
It all depends on what you are really trying to accomplish as opposed to what you say it is to accomplish.
Does it strengthen and rebuild an economy on a realistic and productive basis? Not a bit. Does it envision a future of health and prosperity for a whole nation? Not at all.
What it does do is crush the welfare state, break the back of any political influence on the part of workers to protect their health, security and pensions. It reduces people to the point of desperation where they will be willing to take any job offered at any pay under any conditions. And it will take the power of taxation and spending out of the hands of politicians elected and responsible to the mass of the people and put it in the hands of people beholden only to the wealthiest oligarchs.
Does it set back the progress earned painfully and slowly over the last century to lift people up out of poverty, despair and exploitation, restoring the power and domination of the wealthiest elites? Absolutely.
As I remember from college days, every action has an equal and opposite reaction – you know, those little metal marbles on strings where it’s only the ones on the ends that are visibly moving but the energy transmits through the stationary ones – such a neat trick, that’s physics whenever I think of the subject.
Oligarchical paternalistic austerity is that first ball giving us all a whack. Occupy movements, Arab springs, back to the land, climate catastrophes – the end ball gives us a thwack from the other side.
Are we energized yet?
And don’t leave Goldman Sachs out of the pretty picture…
Not to worry, folks. TPTB here in America would never think of emulating that.
Oh….right….
“I read that as Greece was forced to adopt tough austerity measures to slash its deficit in order to secure an international bailout. Or in simpler terms, if they wanted a bailout, they had to do it.”
That’s not what it says and in any event I addressed that in my initial comment – it was a voluntary choice by Greek politicians, not “forced.” The most direct threat to Greek citizens is Greek politicians, not German politicians.
I think the point is, spanishinquisition, that there is a Faustian bargain involved, that bandaid Shooter242 mentioned might cover a nasty wound, financially speaking.
Wha? “…that Greece correct years of mismanagement by enacting swift waves of cuts and other major economic reforms to regain the confidence of investors and ensure the integrity of the euro.”
From “Extreme Money” by Satyajit Das:
“Greece was running unsustainable budget deficits and was overly indebted. Greek public debt statistics were fudged with derivatives. Initially, banks and investors with exposure to Greek debt purchased credit insurance on Greece in the form of CDSs. They paid premiums to investors willing to earn a return for accepting the risk that the country might default. As the supply of CDS contracts was not restricted by the amount of Greek debt, hedge funds and other rubber-necked financial accident voyeurs joined the party, looking to make profits. Dealers in CDSs made large spreads from standing in between the buyers and sellers.
“As with all insurance, higher risks mean higher premiums. The CDS markets became a visible benchmark of Greece’s problems. The price of insurance was not anchored to the real underlying risk or the public finances of Greece. Traders were not interested in whether Greece was likely to default or in protecting themselves from this risk. They just kept beating the Greek pinata. Traders pushed around the thinly traded insurance contracts, making money from the volatility. Price movements triggered collateral requirements, causing further problems. Eventually, the EU agree to bail out Greece, with help from the International Monetary Fund.
“…Everybody had fun except the inhabitants of the country, whose economy was decimated.”
Confidence has a double meaning.
We heard these exact words four years ago!
From Associated Press
January 11, 2012 12:32 PM EST
WASHINGTON (AP) — President Barack Obama says he wants to reward companies that invest in America and eliminate tax breaks for companies that don’t, and he’s planning new tax proposals to do it.
The president says rising American productivity and increasingly competitive costs here at home means it’s good business to keep jobs in the U.S. rather than overseas. And he says there’s a moral case for it, too, and that business leaders have a responsibility to invest in their country.
The president’s comments came in prepared remarks released ahead of a White House event meant to underscore his focus on jobs a day after his Republican foes competed in the New Hampshire primary. Mitt Romney and other opponents have made attacks on Obama’s economic leadership central to their campaigns.
“When we look back at this in 30 years, we will identify Europe in 2009-2012 as making some of the most catastrophic economic errors in world history.”
I think we will have enough shit in our own back yard to answer for.
Sorry for the off topic post but I spent all xmas looking for products “made in America”. I was 100% successful by the way (assuming $20 bills are still made in America.:) What did former Pres GW say…fool me once shame on the fool er..fool me twice. I can’t believe how much BS is being shoveled at us all the time.
That’s interesting. I wonder how he’s going to weasel out of that.
One of the last big local companies I worked for went from over 5000 local employees to less than 300 as soon as NAFTA was signed. Now corporate is doing great, ~$15B, but lay offs are the norm locally, averaging 2 or 3 lay offs per year, with attending rehires. Most of thier production is now overseas. And this is from a high tech contract circuit board building company, so this is not unskilled labor.
I have been wondering why no one else seem to think that tax breaks for moving production overseas is not our #1 problem here in the US.
I don’t think he will have to weasel out of anything; O is just reissuing his same BS promises from last campaign. Obama/Biden 2012 Change we can believe in..this time I really mean it.
maybe all this imaginary debt created with imaginary money, imaginary cds’s et al, should be wiped off the books worldwide. All free trade agreements rescinded, which would protect the labor of America and start a new monetary system where money is tied to real value of goods, and not money earned from the issue of bogus magical gambling debt in the form of cds’s, or any other scheme that robs nonexistent money from the economies of the world.
No more fractional reserve banking or re-hypothecation of debt
This whole crisis is based on monopoly money and totally absurd. We are not data points we are human beings. We don’t belong on someone’s spreadsheet as commodities to be thrown to the monsters, really craven monsters.
but what do I know..nothing except shit from shinola
You sound like you know everything. Impressive rant; best of the day. I am going to review my shit vs. shinola memo as you now have me doubting what I know, which is clearly less than you.
focus on jobs?…jesus h effing christ..then quit outsourcing them and make it prohibitive to do so..among myriad other things that could actually be done sans rhetorical bullshit.
ha ha Well..I don’t know my ass from a bucket of grapes..I am as poor as a church mouse, so money and I have a tempestuous relationship and I have been dumped again.
The debt load that societies worldwide are carrying is unsupportable. It can’t be serviced without growth, and growth is over.
Placing creditors first in line compromises the ability of society to create wealth. The wealth, if there was to be any, had to be created with the original loan.
As a greater share of production is devoted to debt service, less production is available to meet peoples’ needs, and to produce further wealth. Not only is growth impossible, it becomes impossible to maintain current production.
The “ya think” idea is great, but it would have to be at least twice a day. Look at this restatement of the obvious fact that the Fed operates through the rich and doesn’t and can’t help the people in trouble.
If I buy a bond (govt or private) the interest rate indicates the risk I am accepting. The original buyers of these high rate bonds should have lost their money. If they did Greece couldn’t float another loan nor could Italy or Spain. Instead other govts bailed them out and here we are. Rich people won’t accept risk and refuse to take losses and they own the govts that bail them out when necessary.
everyone is done with this post but I put this link here because it is worth watching, if only for the example of other ways of dealing with money.
http://www.esoterictube.com/the-money-masters.html
Argentine proves otherwise, default does nothing to destroy the economy’s ability to grow compared to the cost of not doing a default, the world deals with reality – countries do not go away and the rest of the world welcomes back the sinner.
Default is the only option – screw the “voluntary 50% haircut”.
Greece needs the next set of “austerity laws” so as to get its tax collection system out of the 3rd world bribe and don’t tax the rich mode, but after that they need to drop the euro and print money like the Drachma was gold so as to get the economy going.
Germany’s love of the Austrian school is destroying the EU – as is it cheapness, greed, lack of gratitude for all the exports made possible by Greece holding down the value of the euro, and its holier than thou attitude after pushing Greece to take on a 200 billion euro debt to build infrastructure for an Olympics the country couldn’t afford but which sent contracts to Germany. Germany will try to screw Greece for decades after, but to hell with them.
You are assuming there were actually serious attempts to impliment proper spending of all that money the EU was dishing out without demanding accountability? You are assuming that the politicians didn’t just hand over the money to their friends to refirbish old family palaces, race tracks, etc. (not to mention plastic surgery so they can hide during the coming purge…?)